Turnover under Rs 40 lakh? No advance tax for your firm

The finance minister on Monday gave something to cheer about to small and tiny industries allowing them the option of avoiding the hassle of paying advance taxes.

The finance minister on Monday gave something to cheer about to small and tiny industries allowing them the option of avoiding the hassle of paying advance taxes.

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From 2010-11 small businesses with a gross annual turnover of up to Rs 40 lakh would not have been offered the option of “Presumptive Tax” where they would have to maintain books for inspection by the income tax department, under the condition that they declare taxable income at eight per cent of total sales.

“To facilitate the business operations of all small tax payers and reduce their compliance burden I propose to expand the scope presumptive taxation to all small businesses with a turnover of up to Rs 40 lakh,” Mukherjee said.

Presumptive tax is a procedure for calculating profits of contractors who supply labour for civil construction or are in the business of plying, hiring and leasing transport for goods.

“As a procedural simplification, I also propose to allow them to pay their entire tax liability from business at the time of filing their return by exempting them from paying advance tax. This new scheme will come into effect from the financial year 2010-11,” he said.